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Capital market-relevant press releases, 2001-04-23, 02:00 AM

Remarks by Dr. Kohler - Thyssen Krupp Steel AG Press Conference Hanover Fair April 23, 2001

Remarks by Dr. Wolfgang Kohler Vice Chairman of the Executive Board of Thyssen Krupp Steel AG and Chairman of the Executive Board of Thyssen Krupp Stahl AG

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Ladies and Gentlemen,

On behalf of my colleague Dr. Hadrys and myself I would like to welcome you to our booth here at Hanover fair. We are pleased that you have been able to join us here today. This briefing continues the tradition of the ThyssenKrupp press reception on the first day of the fair. Following the abandonment of the Group pavilion on Stahlstraße, this year ThyssenKrupp Steel has its own 1,000 m2 booth in hall 4 and is presenting its capabilities with a completely new design. The theme of our presentation is "The Potential of Steel". Our exhibits illustrate the capabilities of steel as a high-tech material for application-oriented solutions meeting the demands of our key customer groups the automobile, construction and appliance industries.

One central element of our program this year is formed by audience-oriented events and discussions designed to underline our motto "Thinking the future of steel". At 2.30 this afternoon Dr. Hadrys and I will host a podium discussion entitled "Focus on steel: Old Economy with a future?" This issue will be debated, under the moderation of TV journalist Klaus Bresser, by NRW labor minister Harald Schartau, BDI chief executive Dr. Ludolf von Wartenberg and other experts. We are convinced that the question mark we deliberately placed behind the topic in our invitation will be transformed into an exclamation mark. We hope that this debate will meet with your interest.

Tomorrow is our traditional Customer Day, followed on Wednesday by an E-Sales & Services workshop where we will be presenting the progress made in modern customer communications. I would like to stress that ThyssenKrupp Stahl has been using the internet to sell steel since the beginning of the year 2000, the first flat steel company in Europe to do so.

On April 26 we are holding another podium discussion with Ranga Yogeshwar and selected guests. Here too, the focus is on steel with a technical debate entitled: Material with a future - Innovations for the 21st century. Other highlights are our exhibition of steel sculptures entitled "steel goes art" and our participation in the careers presentation "Go for High Tech".

Ladies and Gentlemen,

Having dealt with ThyssenKrupp Steel`s presentation at this year`s fair we would now like to brief you about the current situation on the steel market and in our company.

As far as the economic framework is concerned, the forecasts for 2001 have recently been scaled back in general. However the economic climate in Western Europe is still expected to be favorable, even though the pace of growth is also slowing here.

World steel production in the 1st quarter 2001 again reached the high level of the same period last year. This also applies to Western Europe. Despite generally favorable consumption, order intake weakened over the course of the year 2000, mainly due to the stock cycle. After the low in the summer months there was a slight recovery again in the final quarter of 2000. In Germany the picture was similar, though the recovery did not set in until after the beginning of this year. In the first quarter 2001 order intake at 3.3 million tons was in line with the monthly average of the last two - comparatively good - steel years. The conclusion: consumption by the steel-using industries will again reach a satisfactory level in 2001. Overall, the steel industry association Wirtschaftsvereinigung Stahl expects German steel production to decrease only slightly to 45 million tons. You can learn more details at the association`s press conference at 2 p.m. in the TCM.

Prices in Germany flattened slightly at the turn of the year 2001. The intensity of the price competition has increased significantly recently under considerable pressure from imports, particularly from Southern Europe. Encouraging in this context are the increasing announcements of price rises primarily in the USA and Asia, but increasingly also in Europe.

That is the general situation on the steel market. Dr. Hadrys will add his remarks on the stainless market in a little while.

Ladies and Gentlemen,

In the first half of the current fiscal year 2000/2001 the ThyssenKrupp Steel group received orders worth just under euro6.3 billion, a drop of 7% compared with the same period of the previous year. The drop is mainly due to the weak state of the market in the 4th quarter 2000. Based on existing order backlogs, crude steel production in the reporting period was 1% up on the previous year at 8.9 million tons, while sales increased 8% to euro6.5 billion. For the full year 2000/2001 ThyssenKrupp Steel will have to accept a drop in earnings due to the initial market weakness and an increase in raw material costs caused among other things by exchange rate factors. This statement was already made by the Group at the Annual Stockholders` Meeting in March.

In the Carbon business unit - as in the sector generally - orders began to recover again at the beginning of 2001, but for the first half of 2000/2001 as a whole were 11% down on the previous year at euro3.7 billion. The fall is mainly volume-related, as revenues per ton for Thyssen Krupp Stahl AG products are still on average 10% higher than last year`s comparable figure. The recent improvement in the order situation has mainly been for hot flat products, whereas it has yet to materialize for sheet and coated products. However it should be remembered that orders in the 1st half 1999/2000 were substantially higher than our production capacities, which resulted during that phase in a large rise in our order backlog. That is why our equipment continued to be utilized at near capacity. Crude steel production was virtually unchanged at 7.1 million tons for carbon flat steel.

The Carbon business unit achieved sales of euro3.9 billion in the 1st half 2000/2001, up 5%. Shipments were slightly lower than planned, but revenues were still largely stable.

To further strengthen our position in the international marketplace we systematically continued the concentration of iron and steel production and most of hot strip production in Duisburg on the Rhine. The hot strip mill in Dortmund was closed on March 30, and the last blast furnace and the steelmaking shop will follow at the end of this month. These final building blocks in the completion of our site configuration, which is unique in Europe, will create the conditions for realizing the full synergies from the flat carbon steel merger of 1997. Compared with the new Usinor/Arbed/Aceralia group we thus have a considerable time lead. We also believe that the announced merger, which we welcome and from which we will certainly benefit from the perspective of our customers in Europe, will result in further consolidation of the steel market. The strengthening of our position in iron and steel making and hot strip production is key to ensuring a cost-effective supply of material to the downstream processes of cold rolling and coating, which are geared to specialization and internationalization. We head the field in these demanding market segments. Following on from the first casting/rolling plant for flat carbon steel, which we have been operating since 1999, on April 3, 2001 we commissioned the world`s most modern cold rolling mill, an investment worth almost euro150 million, in Duisburg-Beeckerwerth. With the new plant configuration we can supply our customers with cold-rolled sheet in widths up to 2,040 millimeters and thicknesses down to 0.3 millimeters. One focus of production will be high-strength steels for weight reduction in automobile manufacture.

Another example is the euro128 million investment in a new hot dip galvanizing line in Dortmund, which will start production at the beginning of the next fiscal year. This line will allow us to meet the growing demand of the automobile industry for these high-quality products and increase the share of coated products in our cold-rolled deliveries to more than 80%.

Ladies and Gentlemen,

We have made considerable progress in increasing the internationalization of our activities. This is particularly true of the downstream areas finishing, processing and service.

・ One project that serves as a model is the joint venture GalvaSud with Companhia Siderúrgica Nacional in Brazil, which has invested US$250 million to build a hot dip galvanizing line, a steel service center and a tailored blanks facility to supply the Latin American automobile industry. Beginning in December the equipment has been taken into service step by step.

・ The focusing of our investments on the close-to-the-customer processing sectors has led us on the other hand to dispose of our own iron ore mine Ferteco in Brazil, in the same way as important competitors have already done. This week we will be announcing the details of the planned sale of Ferteco to the Brazilian ore company CVRD, which will give us new financial latitude.

・ In February 2001 the contracts were initialed to establish a joint venture with ANSC Angang New Steel Co. to build and operate a hot dip galvanizing line in China. The site is the port of Dalian 450 km east of Beijing. The final negotiations are now being speedily continued. The investment will be US$180 million.

・ Our plans for North America include a hot dip galvanizing line in the USA to add to our tailored blanks and steel service activities near to automobile producers in Michigan.

・ In the electrical sheet business our acquisition from Usinor, UGO, has been integrated in the activities of our subsidiary EBG. In another important step we have acquired the steel division of India`s Raymond Steel Ltd.

Ladies and Gentlemen,

As you can see, we are working systematically to enhance the capabilities of the Carbon business unit of ThyssenKrupp Steel in the international marketplace. We believe this is the best recipe to meet the challenges of the future. My colleague Dr. Hadrys will now illustrate that this principle also applies to the Stainless business unit.

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